In 2020 Australians reported over 7,000 investment scams to Scamwatch, well up on the 5,000 reported in 2019. Scamwatch recorded investment scam losses of $65.8 million but add-in notifications made to other government agencies and the major banks and reported losses across 2020 soared to $328 million. Due to embarrassment, many losses go unreported so we may never know the full extent of the damage.
With a high likelihood that we will all be targeted by scammers at some stage, perhaps repeatedly, how can we identify scams and protect ourselves from losses?
Ignore unsolicited offers
Most investment scams start with a phone call. No matter how compelling the story told by the caller, if you haven’t done anything to invite contact from an investment’s promoter, it is likely to be a scam. The simple solution? Hang up early in the call. If the approach is made by e-mail, social media, or text message don’t click on any links and delete the message.
Beware of promises of large and guaranteed returns
In times of low interest rates, it’s hard to find a good return on lower-risk investments such as term deposits and bonds. The promise of high returns, perhaps with a built-in guarantee may look compelling. But the age-old saying holds: if it seems too good to be true, it probably is.
Some investors are willing to put such promises to the test by making a small investment. When professional-looking statements show that the promised performance is being delivered, the investor makes a much larger deposit. Not long after that the promoter seemingly disappears.
Research the promoter through independent and official channels
Are they based overseas? This is a big red flag. If Australian, are they (and their prospectus) registered with ASIC? Do they have an Australian Financial Services Licence? Do they appear on the list of companies you should not deal with (available at moneysmart.gov.au)? Is their street address genuine and do they have a physical office? How long have they been in business?
Get independent advice before investing
Even with a legitimate investment, an independent assessment is a good idea. With a questionable investment, it might just save you from being scammed.
Educate yourself
Scams are evolving all the time. Government websites moneysmart.gov.au and scamwatch.gov.au provide information on a wide range of scams and are updated as new scams appear. They also provide advice on how you can protect yourself.
What can you do if you’re the victim of a scam?
You can make a report via the Scamwatch website (operated by ACCC), to ASIC, and to your local police. Stop sending money to the scammer, and beware of the double sting where scammers offer to help you recover your losses, for a fee, of course.
While ASIC and ACCC do not provide direct assistance to scam victims, the information can help with investigation and law enforcement, and provide intelligence on scam activity. Police may also be limited in their ability to identify and prosecute scammers, particularly if they are located overseas. The sad fact is that most victims of scams never see their money again.
If you come across a scammer, do not transfer money by any means before consulting it with your financial adviser. Click here to book a session with us.
